Experts Call for Greener Development Finance at AfDB Annual Meetings

Development finance experts convened at the Annual Meetings of the African Development Bank Group (AfDB) to discuss more environmentally and socially responsible ways of funding development projects in Africa.

Delegates of the Association of African Development Finance Institutions (AADFI) held a debate on 7 June 2011 in Lisbon, Portugal, the venue of the AfDB's 2011 Annual Meetings.

The AADFI is an Africa-wide organisation created under the auspices of the AfDB in 1975, and has the status of observer at the World Bank.

ADDFI chairman, Mr. Mvuleni Geoffrey Quena, stressed the importance of a more responsible approach, especially in view of recent environment catastrophes around the world.

“Environmental responsibility is fully linked to social responsibility’, he said. “Africa needs to strength public and private partnerships to achieve a more environmental friendly world.”

Using Guinea as an example, Mr Michael Mahmoud, an independent economic and management consultant, said it, like most West African countries, faces a number of environmental problems resulting from natural factors, population growth and social and economic activities, especially from mining and agriculture.

He cited South Africa as a good example in the move to responsible investment, saying:“South Africa is a country where under the National Environmental Management Act, financial institutions can be found liable for environmental pollution and risks of a social nature.”

“At a micro-level project level, development finance is helpful if it is conditioned”, he underlined, suggesting that ‘projects have to be designed in line with environment-related treaties which regulate hazardous waste, protect endangered species and limit the use of ozone-depleting substances”

Awareness, he stressed, is critical in encouraging adherence to rules and standards on health and sanitary levels, preferential treatment of environmental-friendly goods and services.

According to Mr Michael Mahmoud, Africa’s approach to sustainability is distinguished by the importance placed on social issues such as HIV/AIDS, the inclusion and empowerment of women and disadvantaged groups, and the protection of local societies.

He noted that the AfDB had been introducing social and environmental standards into the region’s financing and lending practices.

He pointed out that the agenda of the African banking sector had broadened considerably regarding green matters following the World Summit on Sustainable Development (WSSD) in Johannesburg in 2002, and that corporate governance standards have also expanded in Africa. The African Peer Review Mechanism is a good example, he said.

He added that ‘it’s up to the institutions to mainstream this approach so that it becomes more and more part of public and private financial sector.”

Mr Bhargav Purohit, the AfDB’s DFI Coordinator, remarked that “as a catalyst to attract continental and external investment, the AfDB’s strategy is, above all, development and not profit maximizing.” He also emphasized the role that AfDB plays in financing development in a environmental and social responsible manner. He urged all FDIs to follow suit.

He said: “We all have to respond to our constituencies, we have a reputation to maintain and we must avoid legal risks and other adverse impacts.”

According to Mr Puronit, being environmental and socially responsible has an impact on reducing poverty, improve health and reduce or avoid conflicts.

“Business sustainability is fully linked to this approach but each case has to be tailored according to your institution”, he stressed, remarking that ‘the fact that western countries do not always take this road is not a reasonable nor logical argument for African leaders and entrepreneurs to forget their countries responsibilities.”